China railway builder prices Shanghai IPO at top

By Tony Munroe and Kennix Chim

HONG KONG (Reuters) - China Railway Construction Corp, which is raising up to $5.4 billion in a dual Hong Kong and Shanghai IPO, priced the mainland China part of the deal at the top of its range on strong demand for shares despite the market sell-off, sources involved in the deal said on Wednesday.

China Railway Construction and its duopoly rival, China Railway Group (0390.HK: Quote, Profile, Research, Stock Buzz)(601390.SS: Quote, Profile, Research, Stock Buzz), are beneficiaries of Beijing's heavy investment in China's creaking infrastructure.

Recent snowstorms in large parts of the country exposed the fragility of transport links struggling to cope with breakneck economic growth.

Strong demand for shares despite this year's market sell-off showed that investors view the infrastructure sector as a relatively safe haven and see value in new listings. China Railway Construction was priced at a sharp discount to its rival.

"China Railway Construction is a proxy for China's infrastructure industry, which is less affected by China's recent tightening policies. Investors like this sector," said Adam Tam, fund manager at Pacific Sun Investment Management in Hong Kong.

China Railway Construction priced the mainland A share portion of its initial public offering at 9.08 yuan each, at the top of an 8.00 yuan to 9.08 yuan range, said the sources, who did not want to be identified because they were not authorized to speak with the media.

The offer values the firm at 26.6 times forecast 2008 earnings -- a 32 percent discount to more profitable China Railway Group's price-to-earnings ratio of 39 times.

The order book for A shares was about 160 times subscribed in the online application portion, while institutional investors subscribed for 60 times the shares available to them, one of the sources said.